Employment conditions have remained relatively upbeat in spite of what even Chinese Premier Wen Jiabao acknowledged earlier this week was an economy under “notable downward pressure.”

But recent data and analyst research suggest China’s labor market is taking this slowdown in stride, unlike the mass disruptions during the global crisis that resulted about 20 million migrant workers released from factory jobs.

A recent survey of 4,000 Chinese businesses by labor data compiler Manpower Group found conditions have weakened since earlier this year, but hiring intentions remain favorable overall in the fourth quarter.

About 20% of businesses surveyed said they expect to increase staff in the final three months of the year, while 43% said they planned no changes and only 4% said they planned on cutting staff, the labor-data tracker said in the report released Tuesday

One explanation might be that China’s economy is not falling off a cliff as had been suggested in some darker scenarios.

Capital Economics economist Mark Williams said he saw relative calm in China’s labor market as the economy downshifts from its rapid-growth era, pointing to sizeable wage gains and other anecdotal evidence of near-full employment.

“There’s a broader message here that tells us something important about the economy. ... [It] suggests that the economy is actually not doing too badly,” Williams told MarketWatch.

Defending Japanese waters from China's navy

In spite of decelerating to about half the annual growth rate during the peak of its expansion, China appears to be holding up quite well compared to South Korea, Japan and other countries which underwent slowdowns at a similar stage in their development.

Still, some of the employment mystery might explained by the ongoing changes in China’s economy that are producing new opportunities for millions of Chinese workers, Williams said.

The September Purchasing Managers’ Index put out by HSBC — which tracks conditions not only at the large state enterprises but also among smaller, privately run businesses — showed its employment subindex remaining above the 50 threshold, indicating expansion, even though manufacturing was in a clear downtrend.

“Part of the answer is that the service sector has been able to absorb those laid off from manufacturing,” Williams said, referring to shifts in the composition of the labor market.

Barclays Capital also hinted at changes, including declines in surplus labor conditions, as a major factor.

Despite the slowing in economic growth, jobs are still being added in major cities, providing employment for those joining the workforces, with the services offering work for “younger and relatively better-educated [migrant] workers,” they said.

Barclays also cited faster growth in China’s inland regions, noting that much of the growth in these areas is related to the stimulus doled out during the prior slowdown.

Another possible explanation for buoyancy in China’s labor market is that the larger size of the economy allows it to better withstand the blows.

Continuing expansion since the last crisis means that China’s economy in nominal gross-domestic-product terms is about 1.5 times bigger than it was in 2008, according to economists.

Meanwhile, Société Générale economist Wei Yao in Hong Kong said companies recognize they slashed payrolls too quickly during the slowdown in 2008 and might be taking a wait-and-see attitude to the current slowdown rather than rushing to trim staff.

“Companies may intentionally respond differently this time because last time they defied the people at the first sign of difficulty. Then, when they tried to hire them back, they find they had to offer much higher wages,” Yao said.

She added that China earlier efforts to rein in population growth through a strict one-child policy could be now be having a favorable effect for new job seekers entering the labor force.

She said the central government was likely to be pleased with the way things are working out in the labor market and the lack of urgency to create jobs.

“It’s rather unfortunate news for those who persistently expect big stimulus,” Yao said.

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